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South Korea and China Extend Their Currency Swap Despite THAAD Issue

Rachel Kang, Oct. 16, 2017, 10:29 a.m.

Korea and China have agreed to extend a currency swap agreement that expired last week. Finance Minister Kim Dong-yeon and Bank of Korea Governor Lee Ju-yeol made the announcement at a joint press conference on Friday in Washington, where they were attending International Monetary Fund and World Bank meetings.

The terms of the deal remain unchanged, amounting to $56 billion or 360 billion yuan over three years.

Negotiations to extend the deal had bogged down amid a spat over the deployment of a Terminal High-Altitude Area Defense battery from the U.S. here earlier this year. China is opposed to the deployment because it believes that its powerful radar can be used to spy on its military activities.

China apparently does not want diplomatic disagreements to harm bilateral economic interests. The deal, which was first signed in 2009 and has been extended three times now, may help China boost the yuan's global influence. For Korea, it creates a safety net in the event of an emergency, as China accounts for 46 percent of Korea's overall foreign currency swaps.

Some experts said the extension of the currency swap deal could be a sign of thawing bilateral relations following the THAAD row, which resulted in China imposing an unofficial boycott of Korean products.